You know that larger Social Security benefits mean a more comfortable retirement, but it's easy to feel like you're at the mercy of the government and a benefit formula you don't understand. You might think that all you can do is apply and hope for the best, but that's not true.
There's one move that could boost the average monthly benefit by up to $166 in one year, and it doesn't require you to do anything fancy or learn how to calculate your checks. If you've got a little money saved up or a steady job and some patience, it could be your ticket to tens of thousands more over your lifetime.
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Holding off on your Social Security application can pay dividends for years to come
Delaying your Social Security application by one year can grow the average benefit up to $166 per month. This could give you nearly $2,000 more per year. You might get even more if you qualify for an above-average benefit.
This has to do with how the government calculates your checks. It was designed to pay you roughly the same amount over your lifetime, regardless of when you claim. That means earlier claimers get more checks, but each one is smaller. Waiting to claim results in larger checks, but fewer of them.
Here's the math: How waiting one year to apply can add up to $166 to the average benefit
Your full retirement age (FRA), which depends on the year you were born, is when you must apply to get the full benefit you've earned based on your work history. It's 67 if you were born in 1960 or later. Older adults have slightly younger FRAs.
Claiming under your FRA is considered early claiming, while applying after it is late claiming. Knowing where you are in relation to your FRA is important because it determines how much delaying one month will increase your checks. The following table outlines how quickly your benefits grow for someone with an FRA of 67.
|
Rate of Increase |
From Ages |
|---|---|
|
5/12 of 1% per month (5% per year) |
62 to 64 |
|
5/9 of 1% per month (6.67% per year) |
64 to 67 |
|
2/3 of 1% per month (8% per year) |
67 to 70 |
Source: Social Security Administration.
Your checks don't grow any further once you turn 70, so there's no incentive to delaying claiming longer than this.
The dollar-value increase a one-year delay translates to depends on how much you've paid Social Security taxes on throughout your career. The more taxes you've paid, the larger your retirement benefit.
Someone who qualifies for the $2,071 average monthly retirement benefit at their FRA of 67 would get an extra $166 per month if they waited until age 68 to apply. But that doesn't mean this is always the right call.
How to decide if delaying Social Security makes sense for you
There are two questions you need to ask yourself to decide whether you should delay Social Security by a year:
- Can I afford to delay my Social Security application?
- Will delaying give me a larger lifetime Social Security benefit?
If the answer to either is no, then it's probably not the right move for you. A larger Social Security benefit in the future is valuable, but it's not worth pinching pennies and taking on debt today. However, if you have a job or enough personal savings to cover your bills in the meantime, delaying your Social Security application could be an option for you.
Similarly, those in poor health will want to weigh their options carefully. Waiting to sign up typically works best for those who expect to live into their 80s or beyond. It could even lead to a larger lifetime benefit for these individuals.
You don't have to decide when you want to claim Social Security right now. But it helps to keep this information in the back of your mind so you're ready when it's time to make that call.
